Repossession is neither nice nor fair

Rising interest rates could lead to a tsunami of repossessions, was Richard Banks, chief executive at UKAR (UK Asset Resolution), formed from the remains of Bradfird & Bingley and Northern Rock. Photograph: Christopher Thomond for the Guardian
Christopher Thomond/Guardian

The man running the bad banks of Northern Rock and Bradford & Bingley has warned that rising interest rates could result in a "tsunami" of repossessions that could revive memories of the 1990s when the courts were clogged with repossession orders forcing families out of their homes.

Richard Banks says the policy of forbearance might be "nice" for homeowners who are behind with the mortgage but it is not "fair" to let them fall further into debt.

The director of UK Asset Resolution (UKAR) has a point but it is not going to be nice or fair for those families who are likely to lose their homes if the cost of borrowing rises next year, as is widely expected.

Some 40,000 homebuyers are expected to forfeit their homes this year. Northern Rock alone offered forbearance to 44,000 last year. Officials reckon one in eight homebuyers has been offered special terms to fend off foreclosure.

Debate over whether these families are victims of reckless lending will continue.

What is sure is that the Labour government's policy of encouraging forbearance did nothing but kick the can down the road.